Over the last several months, I have had the opportunity to research how the role of the Finance Department and the CFO has evolved. For years now, technology and competition have driven change. Leaders are constantly searching for an advantage to help them increase market share and create value for their shareholders.
As I researched these subjects, it became clear that the CFO has increasingly become involved in crafting the company’s strategy. It also became clear that in many cases one area under the direction of the CFO, procurement, seemed isolated and out of the loop in relationship to their part in the company’s strategy.
I could see that although Procurement and Finance share many common goals and should work closely with each other for the good of the company, they often don’t. I was intrigued and decided to drill down a bit more to understand the reasons for the disconnect, the potential benefits if these two entities could get together, and possible ways to bridge the gap.
I developed a sense that procurement often views finance as an impediment to their objectives. After all finance is the department that often restricts what procurement teams want to accomplish. The feeling within the procurement department becomes, hey, without us nothing happens but we don't feel respected.
Another issue blocking collaboration between the two departments is quite simply, language. Procurement does not understand the language of finance and honestly could use help in speaking to and educating all its stakeholders because many of them misunderstand procurement. As we all know, effective communication is key.
I also found that the procurement group feels isolated because the criteria used to measure their success doesn't align with company strategy. Also, the two departments that share such important common goals are evaluated using different criteria. The difference only serves to increase the disconnect and makes achieving organisational goals more difficult.
The two most important goals shared by procurement and finance are, finding cost savings and managing risk. These two departments should work together closely on these issues, and I believe the CFO must lead the way.
The CFO should take steps that would help both teams understand each other. He or she could set up a list of objectives that both departments must work together on to achieve. I believe this type of cross-functional activity would get both sides used to the idea of acting as one aligned unit.
Measuring success in a way that recognizes the combined contributions will pull both groups even closer, and most importantly create a feeling for the procurement team members that they are part of the strategic whole.
One type of program I have seen work across many business functions is having people from each department spend time with the other. They can get a close-up view of the problems each face and bring that information back home to share with others.
After seeing for themselves, I have seen many people improve their entire outlook on how each action affect the other. Nothing improves communication and understanding between co-workers that stepping into the others shoes for a time.
These types of collaborative efforts can promote harmony between departments or divisions and that that will translate into achieving company objectives.
Written by Paul Podbury @ Locomote